Car loan rates

Unfortunately, that’s almost impossible to answer! Lenders change their interest rate offerings all the time, so there’s no one ‘best’ car loan interest rate we can point you to. Plus, a bunch of other factors go into the decision of which car loan is best for you, like what features it offers, what fees are involved, whether you opt for a secured or unsecured loan and your own personal financial situation.

The good news is, you can still find some of the cheapest car loan rates around by doing a price comparison before putting in an application. And that’s where Mozo’s car loan search tool comes in.

There can be a huge difference between the best car loan rate in the market and the worst - so you might be wondering just how interest rates are decided. Here are some of the things that can make a big difference to what interest rate is on offer.

• Secured vs unsecured. Many car loans are secured, because you can use the car you’re buying as security against the loan, and this is good news since secured car loan interest rates are often lower than those for unsecured options. This is because having an asset up as collateral minimises the risk for the lender in case you default on the loan.
• Fixed vs variable. Another factor that might influence the interest rate on a car loan is whether it’s a fixed or variable rate. Fixed rates don’t change for the term of your loan, which means you get the security of always knowing what your monthly repayment will be. Generally speaking, they’re a bit higher, because a lender needs to price in the chance that rates will go up during your term. On the other hand, variable rates change with the market, so they could rise or fall at any time during your loan term.
• Features. As a rule of thumb, you should remember that the more features a car loan has, the more likely it is to have a slightly steeper interest rate. You’ll pay a bit extra so that you have access to money-saving features like free extra repayments and a redraw facility - just remember to weigh up whether you’ll get enough use from these features to justify the extra cost.
• Your credit score. If you’ve got a squeaky clean credit history, then it could help you to snag a cheap car loan rate, since some lenders reserve their best interest rates for borrowers with excellent credit.
• Choice of lender. Different lenders offer different interest rates. Here at Mozo, we usually find that smaller, customer-owned or online lenders often offer better interest rates than the big banks.
• Refinancing. If you are looking to switch do a different loan, your car loan refinance will likely come with a different rate, then if it's that's cars first loan.

With so many car loans on the market, how do you make sure you’re getting the best deal around? Here are a few of our top tips:

• Keep your credit in tip top shape. Quite a few lenders offer different rates depending on your credit score - the cheapest car loan rates are reserved for borrowers with excellent credit. So in order to snag the best rate around, make sure you keep your credit healthy by meeting repayments on your credit card or mortgage, and make sure you understand what the shift to comprehensive credit reporting means for you.
• Consider what you really need. Generally, if you opt for a car loan with all the bells and whistles, it will likely come with a higher interest rate (or steeper fees) than a basic option. This isn’t always a bad thing, because a few great features can help you save on interest, but it’s important to weigh up the benefits against the added cost and decide if you’ll really get enough value to justify a higher interest rate.
• Don’t be afraid to ask for a better deal. One other way to make sure you’re getting the best bargain on your car loan finance rate is to haggle! Lenders are sometimes willing to negotiate on your loan interest rate, especially if you’ve done your homework and can show that the competition is offering a better deal. If you’re already a customer or are willing to move other financial products across to the same place, lenders may be willing to offer you a discount for bundling products as well.
• Compare your options. Finally, if you want the lowest car loan rate around, it’s crucial to compare offers from a range of different lenders, because big banks won’t offer the same interest rates as small online lenders or peer-to-peer options. If that sounds like a lot of legwork and research don’t worry, that’s what Mozo’s car loan comparison table is for.

The real reason finding the best car loan interest rate is important is because it ultimately affects how much you pay each month. And when it comes to car loans, interest rates can be wildly different depending on which lender and product you choose, ranging from below 5% to around 17% at the time of writing.

Our car loan comparison calculator shows that a difference of just 1% can mean hundreds of dollars over the life of a loan. For example, a $30,000 loan over 5 years with a rate of 6.99% is $855 cheaper than one with a rate of 7.99%.

Rates are indicative only and do not represent current products. Please see our table for up-to-date product rates.

Yes, whether you’re buying a pre-loved car or a brand new set of wheels will make a difference to the interest rate you pay. Generally speaking, used car loan rates are a bit higher than loans for new cars.

Why? It basically comes down to the fact that to a lender, a used car is a bigger financial risk than a new vehicle because it's more likely to have wear and tear, and a shorter lifespan. So they plan for this higher risk factor by charging more interest.

The tradeoff is that when buying a used car, you’ll probably need to borrow significantly less - which means you may pay less interest in the long run anyway.

Here’s an example of what we mean:

Based on average rates for new and used cars as of 23/5/18.

While scoring the best car loan rate possible is super important, it’s not the only thing you need to think about when choosing a loan for your new set of wheels. You should think about the whole loan package and whether it’s a good deal. Here are a few things to check before signing up:

• Loan term. Car loans generally come with a term between 1 and 5 years, though some are available for 7 year terms, or even longer. If you choose a longer term, then you’ll have smaller monthly repayments, but pay more interest in the long run. Choose a short car loan term and your monthly repayments will be higher, but you’ll save over the life of the loan.

• Minimum and maximum loan amounts. Most car loans come with limits to how much you can borrow, so keep an eye on these when you’re comparing your options. Unless you’re looking for a particularly small or large loan, you shouldn’t have much trouble finding an offer to suit your needs.
• Features.  Another thing to consider is what features are on offer. Things like being able to make free extra repayments and access a redraw facility can help you pay off your loan quicker. Being able to choose a monthly, fortnightly or weekly repayment schedule is also handy for fitting repayments in with your budget.
• Fees. When considering the cost of a car loan, don’t forget to factor the fees into your planning! Aside from the interest rate on your car loan, fees are the next biggest expense you’ll have to plan for, and can include upfront application fees, ongoing service fees or exit fees when you pay your loan out in full.

One important tool to help you compare car loans on even footing is the comparison rate. This is shown next to the interest rate in our comparison table and takes into account the interest as well as any guaranteed fees included in the car loan. By looking at the comparison rate, you can get a more accurate idea of the ‘true cost’ of a loan.

That’s the easy part. You can compare current car loan rates using our car loan comparison table above, or if you’d like to search for options specific to your needs, you can plug your loan amount and term into our car loan search tool. This works for if your getting a $5000 personal loan or a $50000 personal loan.